Will I have to take the bankruptcy means test?

If your debts are too high and you feel like your only option left is bankruptcy, you’ll need to find out if you qualify to file for bankruptcy before you can. The bankruptcy means test is the test you’ll need to take to show that you qualify for Chapter 7 bankruptcy and before your attorney can help you through the bankruptcy process. With this test, there is a rule about the state of each filer’s finances, and if the filer doesn’t meet the qualifications, he or she can’t file for Chapter 7 bankruptcy.

The first step of the test is to fill out your income calculation. This is any interest, dividends or royalties. It includes your wages, tips, overtime and commissions. You must disclose any income you receive.

Next, if you, as a debtor, make more than the state’s median income, you’ll need to fill out the second part of the test. If you deduct all your necessary and allowed expenses and still have enough income to pay a portion of your unsecured debts, then it’s likely you’ll need to have a Chapter 13 repayment plan. If not, then you may be able to obtain a Chapter 7 bankruptcy.

If you fail the Chapter 7 means test, all is not lost. You can still file for Chapter 13 bankruptcy, which allows you to pay back your debts over the course of five years. You’ll only pay a portion of any non-priority and unsecured debts, and you’ll pay off mandatory debts during this kind of bankruptcy. At the end of the process, any debts you haven’t paid off are normally discharged, allowing you to start fresh.

Source: FindLaw, “The Bankruptcy Means Test,” accessed Sep. 24, 2015